Patrick Boyle On Finance The South Sea Bubble
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Jan 30, 2025 Delve into the financial fiasco of the South Sea Bubble and its intriguing socio-political backdrop in 1720. Discover how coffeehouses in London served as social hubs while brokers and stock jobbers maneuvered amidst tension. Learn about the scandalous rise and fall of stock prices, revealing corruption and speculation. Plus, explore how financial strategies during the Napoleonic Wars helped Britain manage debt effectively, contrasting sharply with America's approach to capital raising and growth.
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Exchange Alley's Coffeehouse Boom
- In 1720, London's Exchange Alley bustled with coffeehouses, not for the coffee, but for South Sea Company stock trading.
- These coffeehouses became hubs after stock jobbers were expelled from the Royal Exchange.
Coffeehouses and Information Asymmetry
- Stock jobbers, expelled from the Royal Exchange for their unruly behavior, found a new home in coffeehouses.
- This allowed them to exploit information asymmetry, often hearing news before the official exchanges.
The Queen's Death Hoax
- A hoax about the Queen's death caused a market panic in Exchange Alley, demonstrating the market's vulnerability to misinformation.
- A group of jobbers, privy to the truth, profited by buying low during the panic.
